Whether you’re preparing to buy your first home, start a home renovation project, or replenish your savings after an unplanned expense, it’s never too early to start saving.
Here are a few things our clients have done to start budgeting to buy a home:
1) Analyze your last 30 days of spending. Download and print your monthly bank account or credit card statements, and get ready to analyze how much money you’re spending. Highlight any recurring expenses that you think you can live without for a few months, and add them up. This will give you a good idea of how much you can actually afford to start saving and determine a monthly savings goal.
2) Check your credit score. Most banks now have a link to check it for free. Your lender is going to need it to pre-qualify you for a mortgage. Your credit score, along with your debt-to-income ratio and a few other factors, is an indicator of how much home you can afford, what types of loans you’ll be approved for and what kind of interest rates will be available to you.
BONUS TIP: If you’re carrying debt, it’s a good idea to make a list of that too, and make sure you have a solid plan to pay it off. You don’t need to be debt-free to buy a home, but generally speaking, the less debt you have, the better.
3) Understand ALL of the costs associated with home buying. Everyone knows about the down payment but be prepared to pay for a home inspection and appraisal, mortgage application fees, property taxes, homeowner’s insurance, closing costs, attorney fees, mortgage insurance, repairs and upgrades, and moving costs.
4) Put a (temporary) moratorium on online shopping. If you’re really trying to save money, this is one of my favorite tips. When you shop online, it can be all too easy to hit ‘add to cart’ and forget that you’re spending your hard-earned money! If you shop in person, you’ll be more likely to think harder about each purchase and if you really need it.
5) Remember that monthly savings goal we talked about? Hold yourself accountable to it. Set a reminder on your calendar to move it from your checking to your savings account each month, and treat it like paying a utility bill to hold yourself accountable.
Questions about saving for homeownership? Drop us a message anytime, or let us know if you’re ready to connect with one of our trusted lenders.